12MTA 1% Pick-A-Payment Programs

Unlike fixed-rate products, the 12 MAT or pick-a-pay has a distinct advantage, there are 3 different payment options. Each month you can choose from the following:

• Minimum Payment with a start rate of 1%. For the next 5 years, the minimum payment option is based on the 1% start rate offering incredibly low monthly payments for borrowers who need more flexibility with payment or who are stretched a little thin with their mortgage payment. The 1% start rate is offered for all types of borrowers: stated income borrowers, investment properties, second homes. Get a $100,000 loan for $425 per month
• The second option is an interest only option where the borrower just pays interest based on the 12 month MTA.
• The third option is to pay principle and interest and fully amortize your loan. This is great for borrowers if some months they decide they want to pay down principle to gain more equity.

This program offers huge flexibility each month offering 3 payment options. There are no penalties if you pay any of the 3 options, it is completely up to you.
What is the 12-MTA?
The 12-Month Treasury Average Index (12-MTA) is based on average annual yields on U.S. Treasury Securities adjusted to a constant maturity of one year, as made available by the Federal Reserve. The 12-month average is determined by adding together the annual yields for the most recently available 12 months and dividing by 12. Here is the historical data from the United State Treasury Department.

Stability: The 12-MTA
The 12-MTA Index does not move up or down as rapidly as other market interest rates because the 12-MTA is an average of annual yields on U.S. Treasury Securities over a 12-month period.
As a result:

• Higher yields are offset by lower yields on a monthly basis throughout the year
• It creates an index which is far less volatile than other pure-rate indices
• Interest rate increases take longer to affect the 12-MTA than other ARM indices

Historically, home loans tied to the 12-MTA have not exhibited sharp interest rate increases such as those that occurred in the late 1980s. Additionally, unlike more volatile indices, the 12-MTA has never increased more than .25% in any month for over a decade.

MTA vs. Other Indicies
The MTA is a very slow index. The index is nearly as stable as the world's most stable index, The Cost of Savings Index. However, MTA mortgages generally have better margins which are fixed through the lifetime of the mortgage. Because the MTA is an average annual yields on U.S. Treasury Securities there is an inherent "lag" in the index which ultimately causes the index to move very slowly. Again, in any given month the index has never raised over .25% for the last decade.

Advantages of 12 Month MTA ARMs:
Flexibility in the monthly payment: It is one of the main advantages of MTA ARMs. With MTA-indexed ARMs you will usually have a choice of payment options. Besides fully indexed and minimum payment options your MTA ARM will probably have an interest only payment option and you will be able to change payment options every month if you like.

Tax Planning: MTA ARMs may be used for tax planning. The borrower can defer interest payments and at the end of the year, analyze their tax situation. If it serves their tax interests, they can make a lump sum payment toward any interest that has been deferred and deduct it for tax purposes.

Easy qualifying: Many MTA lenders allow homebuyers with good credit to apply without documenting their income, assets, or source of down payment. This is helpful for self-employed borrowers or those who have jobs where it is difficult to document their income. Low initial rate: Most MTA ARMs are offered with a very low initial rate. Some lenders will allow you to qualify for a larger loan due to this initially lower rate.

Why Consider an MTA ARM?:
The monthly payment is much lower than with a conventional loan (Low Initial Rate). It is a good mortgage for those with less than perfect credit or if your debt ratio is too high.

It is a good mortgage for those living pay check to pay check, or if you need to reduce your monthly payments.

Monthly savings can be invested or used to pay off credit cards or to start or augment your savings and investments.

It is a good mortgage if you have a need to accumulate more assets, or the need to fund retirement accounts (higher return on your investments).

The MTA is a good fit for people who own their own business, have a fluctuating income, or live on commission.

It is popular with people who invest in real estate.
It is more insulated against market changes.
It has advantages for high-end home purchases (over $300,000 in value).
MTA is convertible to a fixed rate mortgage, and is assumable.

It is easy to qualify for.
It offers flexibility in your monthly payment - you will have a choice of payment options.
The MTA ARM provides more opportunities for financially savvy borrowers who seek more customized and ultimately less costly home-finance choices. This makes the MTA ARM a great financial tool for homeowners, especially those with fluctuating income.